How electronic trading is like renovating a cottage: Managing resources and planning for the unexpected

Renovating an English cottage and electronic trading have more in common than you may think. For both projects, you need to manage a limited resource pool, prioritise the order in which to complete tasks based on their relative importance and complexity, and plan for market events such as interest rate hikes which can catch you off guard with dire consequences!

Before spending any money, you will need to take steps to make sure you’re fully prepared with all the necessary tools, understand the regulatory requirements, and have a rough strategy for execution. You may choose to hire a contractor to oversee the project versus reviewing the details yourself. To stay on track, ideally you’d regularly review the budget for labour and materials (or headcount and technology in the case of trading). While it’s ideal to avoid, you’d need to plan for any obstacles you might encounter.

The same principles apply when trading on the MarketAxess platform. You need to be fully prepared for every instance, big or small, high or low touch, and you want to be aware of all your trading options. Regardless of your experience, in these ever-changing, volatile markets, you might seek out some technical guidance to help optimize your trading decisions along the way.

While trading bonds electronically may be daunting, especially in challenging liquidity environments, MarketAxess has been bringing counterparties together for more than two decades. We provide our clients with a full toolkit of data, protocols, and a diverse pool of global liquidity providers to help clients trade the way they want in any market backdrop. Just like designing your ideal home, we know that client needs are vast and unique to each person—there is no one-size-fits-all approach to trading on our platform.

The MarketAxess platform offers strong functionality for every style of trade. For low touch orders, where there is a cost-saving opportunity by leaning into operational efficiency, we have Auto-X™. This could be compared to using power tools to complete a labour-intensive task. When there’s a large amount of repetitive work to be achieved, it makes sense to invest in equipment to reduce labour and speed up execution. Although the initial down payment might be heavy, most people don’t regret buying that drill or electric screwdriver to complete the task. Auto-X enables trading desks to expand their capacity in the RFQ process with data driven decision-making. You simply set the parameters and let the functionality work for you.

However, there will always be that listed feature in a heritage home which requires a high touch approach. It might require attention, specialist knowledge, perhaps a good understanding of the history of the building, and in this case, power tools (or Auto-X) would not be appropriate. At MarketAxess, we recognise that technology can help to execute these trades in a different way and that they are likely more complex—we strive to provide a different type of support. We can simplify high touch orders into three stages:

• How should I trade?
  Proprietary Marketaxess data provides insights into platform-agnostic trading activity, which helps to decide which protocol is right for the trade (leverage our market leading analytics, team of product specialists, quant researchers or pre-trade reports).
   

• Where is the desired liquidity?
  Dealer data paired with algorithmic performance weighted selection tools help clients determine which liquidity provider to engage with (Axe data, Smart Dealer Selection tools).
   

• How do I get the best execution?
  Strong liquidity! In third quarter 2023, there was an average of six responses for trades larger than $5mm in size in European IG, which could be benchmarked against award winning CP+™ reference pricing analytics.

Just like a blueprint is necessary to drive forward with your renovation plans, MarketAxess provides its users with data to guide you towards the best possible outcomes for high touch trading. We’ve found that trading larger orders electronically can save you money and yield better outcomes. With our proprietary data, data driven assistance for disclosed dealer selection and variety of high touch trading protocols, our platform guides you on the right path to help you achieve your goals. Regardless of the trade, MarketAxess guides you every step of the way via data, protocol selection and dealer selection. With the right processes and protocols in place, you really can do more than you think!

To learn more about how you can use MarketAxess data and high touch functionality to optimise your trading needs, stay tuned for the next blog where we deep dive into dealer selection tools.